Question

Multiple Choice Question 152 Skysong, Inc. has 7000 shares of 5%, $100 par value, cumulative preferred stock and 14000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a $63000 dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017?

Answer 1

$21,000

Step-by-step explanation:

Total preference dividend to be paid:

= Previous year preference dividend payable + Current year preference dividend

= (7,000 shares × $100 × 5%) + (7,000 shares × $100 × 5%)

= $35,000 + $35,000

= $70,000

Preference dividend payable of current year:

= Total preference dividend to be paid - Total dividend paid in the year 2016

= $70,000 - $63,000

= $7,000

Therefore,

Dividend to common stockholders:

= Total dividend in the year 2017 - Current year preferred dividend - Previous year preference dividend payable

= $63,000 - (7,000 shares × $100 × 5%) - $7,000

= $63,000 - $35,000 - $7,000

= $21,000